Reporting its Q3 and nine month 2012 results last Wednesday, AB InBev reported revenues up 9.1% year-over-year to $11.291bn in Q3 (and 6.7% up in 2012) although volumes fell 0.3% in the quarter.
Q3 EBITDA grew 10.6% in Q3 to $3.077bn, while nine month EBITDA rose 6.9% to $11.123bn; the respective net profit figures were $1.864bn (+7.7%) and $5.492bn (+22.3%).
Sales did not meet expectations...
Although Budweiser grew 6.2% globally in Q3 and year-to-date, AB InBev CEO Brito told analysts on an earnings call last week that Budweiser did not meet quarterly expectations in the US, “partly due to ship and retail execution focus from our teams to our innovations”.
“However, we’re pleased with the improvements we’re seeing the brand health scores among the important 21 to 27-year-old core consumer group, the so-called millennials,” he added.
Brito said AB InBev felt the time was ripe to release Budweiser line extensions to show the “craftsmanship, the history, the roots of the brand”, and mentioned a summer limited edition whereby 12 US brewers created a tribute to Budweiser beers that led a limited-edition release.
But despite brand health scores pointing upward, Brito said that AB InBev was slightly disappointed that it had not yet clawed-back market share.
“We think this year, in particular, it’s because of all the focus we gave to the new innovations that…had a great yield in terms of volumes and industry impact. But, of course, something had to give, and that something ended up being Budweiser a little bit,” Brito told analysts.
Finessing these points later in the call, he said that retailers and AB InBev's commercial staff had focused on the firm’s innovations in 2012, due to higher margins and faster sales, with Budweiser losing out in terms of store features and displays as a result.
Budweiser’s strong global growth
In its Best Global Brands 2012 report released last month , Interbrand's analysts warned that, as Budweiser’s global market grows, it continues to lose ground at home, and is now the third brand in its category in the US, behind Bud Light and Coors Light,” the analysts wrote.
“Although the rate of its US decline has reduced recently, can Budweiser become the world’s number one beer if it is not number one at home?” they asked.
Nonetheless, AB InBev remained committed to Budweiser (the firm’s No.2 brand behind Bud Lite), Brito added, due to its history and global growth, while the company wanted to reinvigorate the brand with music, for instance, which helped cement Budweiser as an iconic US brand in the first place.
Discussing AB InBev’s broader decision to sacrifice volume for value share, Brito told Lauren Torres from HSBC Research Division that, “in the old days, there was a big temptation to rebalance the share equation with better brand activity”.
“Now that door is pretty much closed and we have to do the Bud Lite Platinum…the [Bud Lite] Lime-a-Rita, the Shock Top, the Stella Artois to rebalance share,” he said.
He added that AB had cut an annual loss of 0.5-0.6% over the past two years to 0.26% in the year to date, with “much better” pricing and mix.